GENEVA — There have been revolutionary changes in the trade of financial services since the General Agreement on Trade in Services (GATS) came into force in 1995.

The complicated financial instruments that threw the global economy into a tailspin weren’t even in the incubation process then, so it was impossible to incorporate them in the legislation, a WTO Public Forum session on trade in financial services reminded on Tuesday.

And for that reason, many countries have relinquished their ability to regulate.

“If a country took a commitment, they are not allowed to schedule an exemption,” said Lori Wallach, director of Public Citizen’s Global Trade Watch Division. “A country was allowed to take exceptions if they had a crystal ball in 1990, foresaw the crisis, and thought about what they might do in the future.”

But, she said, old rules may need updating.

“There are large questions about whether or not the rules as well as the commitments made back then are appropriate for now,” Wallach said.

Andrés Arauz, general banking director at the Central Bank of Ecuador, said there was no way of predicting how innovative financial institutions were going to be.

“Just for everybody to have an idea of what we’re talking about: the ratio of financial derivative contracts to real GDP has gone from about two times in the year 2000 to over 10 times in the year 2010,” Arauz said.

Arauz said this means there are more derivatives contracts, interest rate swaps, and currency swaps, as well as all carious bets and options and futures.

“So, that obviously creates a bubble and high volatility in our systems,” he said.

Etienne Vlok, senior researcher at the South African Clothing and Textile Workers Union, said South Africa made the right decision not to open its financial services sector up unconditionally during the Uruguay Round that created GATS, but the country changed course with its Doha Round offer.

“In the Doha Round, South Africa has made an offer to further liberalize and open its financial sector, which would increase the risk of financial contagion when other countries experience difficulties, and can lead to instability in the sector,” Vlok said.

Vlok said there’s been unprecedented growth in the South African derivatives market, and that from 2000 to 2008 futures and options contracts in food derivatives alone increased by 469 per cent.

“Based on what we now know about derivatives roles in both the economic and food crisis, should South Africa want to regulate, or even ban, such risky trading, it would be very difficult, as it has already made an offer,” he said.

Developing countries should take that into consideration, Vlok warned.

“Of course, the lesson for other developing countries who would ever considering making an offer in this area would be that they would have to anticipate all areas where they might want to potentially restrict futures trading and include these as limitations in their commitment schedules. Otherwise, their ability to impose such restrictions would be lost.”